New research shows that 1 in 2 Australians are currently experiencing financial stress
Financial stress is widespread in Australia and research conducted by Your Financial Wellness (YFW) has shown that nearly 1 in 2 (46 per cent) Australians are experiencing financial stress. This is higher for women and for younger Australians.
The research also shows that over half (51 per cent) of Australians sometimes worry about meeting their regular expenses, and one in four (27 per cent) report overwhelming or high levels of financial stress.
The Your Financial Wellness Index, which has been validated by the Centre for Social Impact at the University of New South Wales (UNSW), shows that on average, the financial wellness score of Australians is 6.4 out of 10. A score of 5 or lower indicates significant financial stress and women score 6.1 on average compared to men who score 6.9.
The index also shows that financial wellness improves with age and is higher for those who own their own home (score of 7.9) when compared to those who are renting (5.1).
Income does not guarantee low financial stress with over 1 in 10 (11 per cent) high earners indicating financial stress, however the financial wellness score does improve when consumers have at least a one to two month savings buffer. In saying this, 2 in 5 (40 per cent) respondents have less than a month’s salary in their savings account.
RFi Group research shows that women are typically less likely than men to agree that they feel confident making decisions about their finances and banking and are also less likely to agree they could handle an unexpected expense of $1,000 if it came up. The importance of having an emergency savings buffer continues to rise in importance, especially when considering the pandemic and those who have seen a decline in their income or loss of employment.
Co-founder and chief executive officer Alex Hassall said the YFW research has significant implications and ‘can help shape policy responses from Government about key issues affecting our financial wellness’. He added that ‘owning your own home is the single most important factor in increasing financial wellness, but this is becoming more of a challenge for many to achieve this goal’.
The YFW research showed that top savings goals were to boost retirement savings, save for a holiday, repay a mortgage or credit card debt, buy a car or buy a home. Looking at this research by age, it is evident that the top goal for those aged 20 to 29 is to buy a home, whereas for those aged 45 and above, retirement savings is the top goal.
Hassall also commented on the correlation in the research between financial literacy and financial wellness, stating ‘successive governments have tried to improve financial literacy, but we see a connection between financial institutions and their customers.
We believe that financial wellness is the responsibility of caring financial institutions, who can strategically position themselves as helping their customers achieve financial wellness and go beyond just offering products to them’.
YFW is partnered with financial institutions including Teachers Mutual Bank, MyState Bank and Aware Super and these research partners agreed the research has insights that are important to policy makers as well as the institutions and members.
Aware Super chief executive officer Deanne Stewart highlighted the value of the research and said, ‘worryingly, but not surprisingly, the report highlights that financial stress disproportionately affects more women than men and highlights the need to support women with better financial education and assistance during their working lives, where we can see financial wellbeing and literacy is low, and in their retirement where women currently retire with up to 50% less super.
‘This clearly has a significant impact on the retirement outcome and well-being of many women and there is a clear need for financial institutions to respond and be part of the solution’.
Teachers Mutual Bank chief executive officer Steve James commented that ‘it’s important that all financial institutions have the right frameworks and policies in place to support consumers.’
Considering the current lockdown in Australia due to the pandemic, James also commented that ‘the current COVID-19 situation is challenging for all Australians, and in particular those who are facing a loss or disruption to their income at this time. The new YFW research highlights that even prior to the lockdowns, almost one in two Australians were experiencing some form of financial stress.
We understand that the uncertainty of the current situation may add additional burden and financial strain. Financial institutions have a crucial role to play in supporting Australians through these times and we strongly encourage customers to get in contact with their financial provider for assistance’.